Patent portfolio deployment bridging the rd, patent and product markets

PATENT PORTFOLIO
DEPLOYMENT
Bridging the R&D, Patent
and Product Markets

10101_9789813142435_TP.indd 1

16/12/16 1:45 PM


b2530   International Strategic Relations and China’s National Security: World at the Crossroads

This page intentionally left blank

b2530_FM.indd 6

01-Sep-16 11:03:06 AM


PATENT PORTFOLIO
DEPLOYMENT
Bridging the R&D, Patent
and Product Markets

LIU Shang-Jyh
FONG Hoi Yan Anna
LAN Yuhong Tony

World Scientific
NEW JERSEY

•

LONDON

10101_9789813142435_TP.indd 2

•

SINGAPORE

•

BEIJING

•

SHANGHAI

•

HONG KONG

•

TAIPEI

•

CHENNAI

•

TOKYO

16/12/16 1:45 PM


Published by
World Scientific Publishing Co. Pte. Ltd.
5 Toh Tuck Link, Singapore 596224
USA office: 27 Warren Street, Suite 401-402, Hackensack, NJ 07601
UK office: 57 Shelton Street, Covent Garden, London WC2H 9HE

Library of Congress Cataloging-in-Publication Data
Names: Liu, Shang-Jyh, author. | Fong, Hoi Yan Anna, author. | Lan, Yuhong Tony, author.
Title: Patent portfolio deployment : bridging the R&D, patent and product markets /
Shang-Jyh Liu, Hoi Yan Anna Fong, Yuhong Tony Lan.
Description: [Hackensack?] New Jersey : World Scientific, [2017] |
Includes bibliographical references.
Identifiers: LCCN 2016026157 | ISBN 9789813142435 (hc : alk. paper)
Subjects: LCSH: Patents. | Patent laws and legislation.
Classification: LCC T211 .L58 2017 | DDC 608--dc23
LC record available at />
British Library Cataloguing-in-Publication Data
A catalogue record for this book is available from the British Library.

Copyright © 2017 by World Scientific Publishing Co. Pte. Ltd.
All rights reserved. This book, or parts thereof, may not be reproduced in any form or by any means,
electronic or mechanical, including photocopying, recording or any information storage and retrieval
system now known or to be invented, without written permission from the publisher.

For photocopying of material in this volume, please pay a copying fee through the Copyright Clearance
Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA. In this case permission to photocopy
is not required from the publisher.

Desk Editors: Dipasri Sardar/Dong Lixi
Typeset by Stallion Press
Email:
Printed in Singapore

Dipa - Patent Portfolio Deployment.indd 1

05-07-16 9:45:36 AM


9”x6”

b2559  Patent Portfolio Deployment: Bridging the R&D, Patent and Product Markets

Contents

About the Authorsvii
Chapter 1 The Rise of the Patent Industry
Chapter 2 Patent Portfolio Deployment in Modern Economy

1
17

Chapter 3 Deployment with Patent Analytics: Theory and Practice29
Chapter 4 Non-Patent Literature and Journal Intelligence

41

Chapter 5 Patenting Strategies

59

Chapter 6 R&D Strategies

93

Chapter 7 Licensing, Litigation and Alliance Strategies

133

Chapter 8 Valuation

195

Index255

v

b2559_FM.indd 5

12/23/2016 6:47:01 AM


b2530   International Strategic Relations and China’s National Security: World at the Crossroads

This page intentionally left blank

b2530_FM.indd 6

01-Sep-16 11:03:06 AM


9”x6”

b2559  Patent Portfolio Deployment: Bridging the R&D, Patent and Product Markets

About the Authors

LIU Shang-Jyh
LIU Shang-Jyh is a Professor of Law and Technology Management at
National Chiao Tung University (NCTU), Taiwan. He has a Ph.D. in engineering (Texas A&M University) and a degree in law (National Taiwan
University). This interdisciplinary background integrating technology,
business and law strategically shaped his teaching, research and practice.
At NCTU, he is the Dean of the Law School, the Founding Chairperson
of the Graduate Institute of Technology Law, as well as a former Dean of
International Affairs of NCTU. In particular, he is a pioneer and a leader in
Intellectual Property (IP) education and service. He has successfully established a new paradigm of legal education and empirical research in Taiwan.
Ever since 1994, he has trained more than 7000 IP professionals in Taiwan
and who in turn contributed to the competitiveness of Taiwan’s industry.
Internationally, he has lectured at the National University of Singapore,
Tulane University (Asia Global MBA), Beijing University, Nanyang
Technological University, the Hong Kong Polytechnic University, etc.
Professor Liu is active in both academia and industry. He is an international arbitrator and an advisor to many high-tech companies and
public agencies. Professor Liu published widely in renowned international journals such as IEEE Transactions on Engineering Management &
International Journal of Technology Management. He also authored a

chapter in APEC’s “Strategic Intellectual Asset Management for Emerging
Enterprises” and a chapter in WIPO’s “Leveraging Intellectual Property as
vii

b2559_FM.indd 7

12/23/2016 6:47:01 AM


9”x6”
b2559  Patent Portfolio Deployment: Bridging the R&D, Patent and Product Markets

viii

About the Authors

a Strategic Business Asset: Making IP Assets the Core of Strategic
Business Management”. Furthermore, he serves as the Chief Editor of
Technology Law Review.
FONG Hoi Yan Anna
Anna Fong has years of working experience in a few multinational companies. She has worked in various positions from R&D, design to testing.
Anna graduated with a Bachelor and Master in Electrical and Computer
Engineering. Her work as an engineer was focused in the Microwave
Communications Technology, in particular Surface Acoustic Wave (SAW)
components designs. She has published in scientific papers in SAW filter
designs and is a named inventor in a US granted patent.
Anna has been working in the field of Patent Management since she
graduated from her Ph.D. in IP Management & Strategy. She has a keen
interest in Technology Planning to IP monetization. With her experience
in Telecommunications industry, she has a thorough understanding of patent landscape analysis and patent licensing and litigation management in

such fields and has been involved in various consulting projects on patent
analysis and deployment.
LAN Yuhong Tony
Tony was educated in National University of Singapore on a scholarship
of Singapore government, and graduated with a First-Class Honors degree
in Biomedical Sciences. He later obtained a Graduate Certificate in
Intellectual Property Law (GCIP) with Merit from NUS Law School and
Singapore IP Academy, a Master in Intellectual Property Management and
a Ph.D. in Technology Intelligence and IP strategy.
Tony is a qualified patent agent in China and has years of experiences
working in Intellectual Property law firm, specializing in patent drafting,
prosecution, and exploitation. He has also worked on various consulting
projects in relation to patent analysis and deployment strategies covering
various technical areas such as wind turbine, LED, stem cell, big data
and cloud computing. Tony has also published on biomedical sciences &
patent management in international journals, and presented on patent
management and strategy at international conferences in countries such
as US, Canada, Japan and India.

b2559_FM.indd 8

12/23/2016 6:47:01 AM


9”x6”

b2559  Patent Portfolio Deployment: Bridging the R&D, Patent and Product Markets

Chapter 1
The Rise of the Patent Industry

1.1  The Phenomena — The Surge of Patent Filings
A patent is an exclusive right granted by a sovereign state to an inventor
or assignee for a limited period of time. This is granted in exchange for
detailed public disclosure of an invention. This definition highlights two
key functions of a patent: it is both a legal right, as well as a signal of
technological invention.
With the advent of the knowledge economy, a patent, given its five exclusive rights of make, use, sell, offer to sell, and import, has evolved from an
“infringement gatekeeper” to an effective instrument of industry power. In
addition, the patent system has been institutionalized by legal statues worldwide to harmonize its protection and commercialization in all jurisdictions.
Never before have any statutory rules been established globally on the scale
enjoyed by patents (or other forms of intellectual properties). This further
expands the industrial influence of patent rights.
As a signal of technological invention, patents worldwide have come
together to form one of the largest technology databases, providing a great
source of technological intelligence for analysis and exploitation. In addition, as patents include legal and commercial information, patent databases could also reveal valuable legal and commercial intelligence.
Corporations and public agencies could employ such intelligence, including the technological, legal, and commercial aspects, to derive their business strategies.
1

b2559_Ch-01.indd 1

12/23/2016 6:41:50 AM


9”x6”
b2559  Patent Portfolio Deployment: Bridging the R&D, Patent and Product Markets

2

Patent Portfolio Deployment

Against the backdrop of patents becoming an instrument of industrial
power and signal of technical invention, the media has reported that the
­patent-filing rate is growing exponentially on a global scale.1 There are also
numerous reports on a patent arms race (Chien, 2010; Chien & Lemley,
2012). The surge of patents has become an undeniable global phenomenon.
The driving force behind this patent surge is multidimensional. Research
and development (R&D) activities today systematically generate inventions,
increasing the number of potential candidates to be filed as patent applications. Moreover, technology products in the market are increasingly sophisticated, involving the integration of multiple features and functions, all of
which require proper patent protection against infringers and competitors.
Last but not least, patent laws across the world are undergoing rapid change,
altering the patent practice and creating uncertainty. Thus, technology
organizations need to file multiple patents for a single inventive concept to
adapt to the changing legal regime.
However, the increasing number of patents worldwide does not promote the value of patents as a whole. Instead, “patent paradox” is found
to depreciate the value of patents on average (Hall & Ziedonis, 2001). An
individual patent scarcely stands firmly on its own, be it in terms of legal
strength or economic returns, the causes of which have been discussed and
speculated broadly (Guellec & de la Potterie, 2000; Parchomovsky &
Wagner, 2005). Is there a failure of the valuation process of techno­logy
commercialization? Or is the poor performance an outcome of patent
thickets being in a haphazard manner?
A careful interpretation of such a phenomenon shows that the key
players in such a global trend are undergoing organizational restructuring
to accumulate not only a huge number of individual patents, but also purposeful patent portfolios. In this chapter, we first review the advantages
and disadvantages of the existing definitions of the patent portfolio and
propose our own version of definition — without a proper definition that
clearly addresses the characteristics and functions of the patent portfolio,
it is impossible to master the art of deployment in modern knowledgebased economy.
 World Intellectual Property Indicators, 2015, World Intellectual Property Organization,

pp. 23–32 ( />1

b2559_Ch-01.indd 2

12/23/2016 6:41:50 AM


9”x6”



b2559  Patent Portfolio Deployment: Bridging the R&D, Patent and Product Markets

The Rise of the Patent Industry

3

1.2  What is a Patent Portfolio?
According to the European Patent Office, a patent portfolio is the list of
patents owned by an individual or a company.2 This definition, while
widely adopted, focuses on the ownership aspect, but provides little information on the exact nature and functions of a patent portfolio. Extending
this basic definition, Parchomovsky and Wagner (2005) further proposed
that a patent portfolio is an aggregation of a number of related patents that
generate a value greater than the sum of its parts. In this book, we will
argue that it is not merely an aggregation of related patents, but a strategic
aggregation of individual patents into purposeful assets. More importantly, we believe that the essence of a patent portfolio is in its deployment
(i.e., the underlying structure and the strategies behind making use of the
port­folio). The value of patent portfolios can multiply many folds if one
can identify the links to products sold and master the strategies and tactics
behind the use of the portfolio. This involves both the formation and the

exploitation of patent portfolios.

1.3  Organizational Restructuring
The quality of human life has improved dramatically since the First Economic
Revolution with the rise of property rights (North, 1990). The First Economic
Revolution was a time when mankind switched from being hunters and gatherers to being farmers. Property rights arose during this time to facilitate
trade. Organized trade helped to manage the transaction costs more efficiently. At that time, the legal system started to develop to protect physical
property and spurred this Economic Revolution.
This continued for another 6,500 years or so until the Industrial
Revolution kicked off in England in the mid-1700s. People started to leave
the farms and began to work in factories. The new economy encouraged
new knowledge accumulation and revolutionized property rights.
Structured organizations and society started to take shape. These organizational structures helped society to run more efficiently. As the Second
  (Last
accessed 20th November 2016).
2

b2559_Ch-01.indd 3

12/23/2016 6:41:50 AM


9”x6”
b2559  Patent Portfolio Deployment: Bridging the R&D, Patent and Product Markets

4

Patent Portfolio Deployment

Economic Revolution continued and developed, the legal system also

evolved and gave rise to patents. Its primary purpose at the time was to
provide protection for industries.
The 21st century signaled the coming of the Third Economic
Revolution, which was propelled by the same need to manage transaction
costs efficiently. This era has seen knowledge generation rate grow to
unprecedented levels. During the Second Economic Revolution, vertically
integrated companies dominated the full value chain from R&D to manufacturing, then marketing and sales to the final product. This changed after
the Third Economic Revolution when the economy encouraged further
segmentation of the value chain. While there may still be companies that
are vertically integrated, more and more companies only focus on one
particular segment of the value chain. Entities such as universities,
research institutes, and even some individual inventors and intellectual
property (IP) providers dominate the R&D segment. They focus on
knowledge creation, resulting in new inventions. There are some companies that only focus on patent drafting and maintenance. There are also
companies that take the IP from the inventors and use the technology to
manufacture products. In particular, the Third Economic Revolution
demands an efficient way to perform R&D to meet the demand of new
products.
This has pushed the organizational restructuring to a higher level to
the extent that some companies have spun off their R&D arms into new
business units focusing solely on R&D. The inventions from R&D need
to be passed onto the manufacturers. This encouraged the appearance of
brokers for patent sales and the rise of the licensing business for patents.
In this Third Economic Revolution, patents no longer play a supportive
role to protect the inventions. They have become business units in their
own right. The rise of this patent business has given rise to various types of
patent entities: patent management companies, patent holding companies,
patent brokering companies, patent service companies, non-practic­ing entities (NPEs), and patent aggregators, alliances and pooling to further
increase the transaction efficiency. It has been demonstrated in recent
years that the grouping of patents into portfolios allow them to be

deployed more strategically. There is also a need for technical service
providers to develop these portfolios strategically (see Figure 1.1).

b2559_Ch-01.indd 4

12/23/2016 6:41:50 AM


9”x6”



b2559  Patent Portfolio Deployment: Bridging the R&D, Patent and Product Markets

The Rise of the Patent Industry

5

Figure 1.1   Organizational restructuring of patent entities

1.4 The Emergence of Patent Portfolios
and Patent Market
Patent portfolios have emerged from macro and micro understandings of
the changing knowledge-based economy. The organizational restructuring
heralded the rise of a new industry. The Patent market is in effect, a
response to the need to aggregate multiple patents to meet supply and
demand in the value system.

1.4.1  An industrial perspective
At a macro level, the knowledge-based economy can be divided into three

markets: Innovation, Patent, and Product. Accor­
ding to the Antitrust
Guidelines for Collaborations Among Competitors issued by the Federal
Trade Commission and the U.S. Department of Justice (2000),3 the
Innovation market “consists of the research and development directed to
particular new or improved goods or processes and the close substitutes
for that research and development.” The Patent market “consist[s] of the
  (Retrieved on
19 August 2015).
3

b2559_Ch-01.indd 5

12/23/2016 6:41:50 AM


9”x6”
b2559  Patent Portfolio Deployment: Bridging the R&D, Patent and Product Markets

6

Patent Portfolio Deployment

IP that is licensed and its close substitutes.” Finally, the Product market
consists of any goods and ­services resulting from the implementation of
the technology.
In each of these markets, patent portfolios resulted from the need to
provide statutory protections to technological inventions. For example, in
the Innovation market, the various corporations, research institutes, and
universities easily generate voluminous inventions because everyone

stands on the shoulders of giants. Nowadays, the numerous sources and
integrations of inventions are common and inevitable. Such voluminous
inventions would require a systematically built patent portfolio to safeguard their values.
In the Patent market, the supply and demand of intangible assets from
institutions and corporations doing R&D and those producing the final
products have encouraged new business models to provide trading platforms and consortia. Many new entities have arisen up to contribute to the
flourishing patent market. NPEs are one result of new business models
arising to facilitate such transactions.
The Patent market has developed a higher level of sophistication in
recent years due to the increasing complexity of modern high-tech industry
and the evolution of patent law to cater to the changing Patent market landscape. Patents are seldom operated individually today. Instead, they are
often managed, licensed, litigated, and transacted as portfolios. Working
with a patent portfolio offers higher value because it has a higher chance
of surviving invalidation challenges by competitors in response to demands
for licensing fees (Lanjouw & Schankerman, 2001; Somaya, 2012). Patent
portfolios also provide additional insurance to the fast-changing legal
regime that constantly reviews and refines the validity of patents. It is,
therefore, advisable to have a portfolio of patents to protect the various
aspects of the technology in case some of the patents are invalidated due to
changes to substantive law (Cahoy, 2013). Besides strengthening the legal
aspects of patents, patent portfolios extend the protection of a techno­logy
by aggregating similar inventions. In such a way, the added value of the
patents to the products would be greater. This may provide a better basis
for higher damages awards and/or licensing fees.
In addition, the standardization of technologies and the subsequent
formation of alliances as well as the evolution of standard-essential patents (SEPs) have further expanded the patent system to a new industrial

b2559_Ch-01.indd 6

12/23/2016 6:41:50 AM

9”x6”



b2559  Patent Portfolio Deployment: Bridging the R&D, Patent and Product Markets

The Rise of the Patent Industry

7

dimension. As such, the Patent market has more exciting activities with
the appearance of the evolving Patent market.
In the Product market, patents continue to provide a reasonable
protection to the technical features of products. The various product features could each constitute a patent portfolio too. Moreover, the formation
and diversification of patent portfolios will enhance the product competiveness and encourage cooperation among market players. Therefore,
from an industrial perspective, patents need to be managed at a portfolio
level (see Figure 1.2).
Patent portfolios, however, are not just the inevitable results of the
modern economy; they are also the catalyst for a chain reaction of exponential growth of the industry. Patent portfolios play an important role in
bridging the Innovation and Product markets. The effective use of patent
portfolios would enhance and leverage the Innovation and Product markets. Patent portfolios serve to interlock the R&D (or Innovation) and
Product markets to build up an industry.

1.4.2  A corporate perspective
At a micro level, which is in effect, analyzed from a corporation’s perspective, patent portfolios arise as a result to mitigate the risks along the

Figure 1.2   The emergence of patent portfolios from an industrial perspective

b2559_Ch-01.indd 7

12/23/2016 6:41:51 AM


9”x6”
b2559  Patent Portfolio Deployment: Bridging the R&D, Patent and Product Markets

8

Patent Portfolio Deployment

product development cycle of an enterprise. The product development
cycle can be divided into the design stage, the IP generation stage, and the
product commercialization stage. At each stage, the enterprise will
encounter various types of risks. Some of these risks remain throughout
the product development process. There are, however, some risks that are
more prominent at specific stages of product development. For example,
technology risks are higher at the design stage. A company will face market uncertainties especially when it wants to develop a completely new
product that the market does not have at the moment. Smart phones is one
such example. In order to mitigate such risks, a company may need to have
a good combination of market, technology, and patent intelligence to build
up a strong portfolio of intellectual assets even at the initial design stage.
It may not be the first mover like Apple in the iPhone industry; nevertheless, it can be an intimidating fast follower to compete with it. Samsung
and HTC are good examples.4,5 Other more subtle risks in relation to the
market may be the geographical uncertainties, such as the location where
a product is launched. Considering risks like these early on would help a
company plan an IP portfolio that is able to withstand challenges in various markets. There will also be techno­logy uncertainties at the initial
stage, because companies are not clear about the best technology to use in
a new product. A company also needs to keep abreast of new inventions

by other companies and ensure that they do not reinvent the wheel.
At the IP generation stage, patenting risks would be more prominent.
As we have understood from the industrial perspective, there are a lot of
uncertainties arising from the increasing complexity of the Patent market.
At the IP generation stage, a company needs to be aware of the patent
thicket and be careful not to be caught in such a maze. It needs to analyze
the patent landscape of the technology in use and file patents in areas that
are not too crowded. With such a patent thicket problem, a company may
also find itself being caught in patent wars. In this situation, the need for
a good patent portfolio is even more critical. In preparing the company to
  />5
  />4

b2559_Ch-01.indd 8

12/23/2016 6:41:51 AM


9”x6”



b2559  Patent Portfolio Deployment: Bridging the R&D, Patent and Product Markets

The Rise of the Patent Industry

9

understand the patent landscape of the technology, a company may also
find itself facing uncertainties related to the use of analytical tools and

methods. This is the information extraction uncertainty. Besides these
intrinsic risks of patent analysis, a company may also be subjected to risks
in partnership. No single company would be able to amass sufficient patents to defend its products. The solution to this may lie in cooperating
with others by patent pooling, cross-licensing, and even engaging in patent alliances.
At the commercialization stage, the related risks may involve valuation
and infringement threats. Valuation is a complex topic. It involves technological, legal, and economic analyses. An efficient and agreed-upon method
of patent portfolio valuation has yet to be found. Patent infringement is a
key threat for many practicing companies. It means that their products may
be subjected to injunction threats, which would directly affect their sales.
An effective mitigation system for such risks relies on the strategic
formation and enforcement of multiple patent portfolios. These multiple
patent portfolios are the bolts and nuts of a system that helps enterprises
develop their products from R&D to profitable products (see Figure 1.3).

Figure 1.3   The emergence of patent portfolios from the corporate perspective

b2559_Ch-01.indd 9

12/23/2016 6:41:51 AM


9”x6”
b2559  Patent Portfolio Deployment: Bridging the R&D, Patent and Product Markets

10

Patent Portfolio Deployment

1.4.3  Interaction between industry and corporation
The success of an industry at a macro level and that of an enterprise at a

micro level requires a good understanding of the dynamic relationship
between the Innovation, Patent, and Product markets. At the same time, it
also requires the establishment of an effective risk mitigation mechanism
to ensure the smooth transition between the R&D ideas in the design stage,
the IP generation stage, and finally the product commercialization stage
within an enterprise. In fact, the overall success hinges upon the dynamic
interaction between the enterprise and the industry. The enterprise on the
one hand will contribute inventions and hence patent portfolios to build up
and influence the patent portfolios in the industry. On the other hand, the
industry will influence the relevance and usage of patent portfolios to be
formed within an enterprise. This builds up an ecosystem for the growth
and application of patent portfolios (see Figure 1.4).
The secret to forming a patent portfolio as illustrated in Figure 1.4 lies
in a thorough understanding of the nature and usage of patents and patent
portfolios. For individual patents, the details to master include deciding
the type of patents to be filed (such as product or process patents) and
drafting the patents such that the claims will properly disclose the protective regimes and can easily link to future infringing products. The simplest
way to build up a patent portfolio from a patent is to file a continuation or
continuation-in-part application and combine them with patent applications in multiple jurisdictions. From a simple portfolio, a more complex

Figure 1.4   The dynamic interaction between corporation and industry

b2559_Ch-01.indd 10

12/23/2016 6:41:51 AM


9”x6”

b2559  Patent Portfolio Deployment: Bridging the R&D, Patent and Product Markets

The Rise of the Patent Industry

11

Figure 1.5   The formation of patent portfolio

patent portfolio requires the protection of the invention using hardware
and/or software. It may also entail a portfolio with patents that protect the
core product and associated pro­ducts. For a more sophisticated technology, a patent portfolio would comprise patents linking directly to the core
technology, and enabling and enhancing technologies of the whole platform. A further expansion of the patent portfolio would require collaboration between multiple enterprises to form alliances and standards to best
protect the interests of everyone (see Figure 1.5). Only with such an
understanding and treatment of patents can there be a flourishing patent
industry.

1.5  The Emergence of Intermediaries
The emergence of patent portfolios and the rise of the Patent market indicate that the Patent market is a crucial connector for innovation flowing
from the Innovation market to the Product market. Patents are no longer
just bystanders standing on the sidelines at the success of the economy
(see Figure 1.6). In fact, patents have their own market. The operation to
fulfil the supply and demand of technology is being implemented through
patents.
While the three markets are distinct in their core competence; they are
interconnected for the well-being of one another. The R&D market needs to
translate the inventions accurately into patents. The patents need to be aggregated constructively to form a portfolio that has a strong link with products.
If this mechanism is not operating efficiently, there will be two valleys of
death in the ecosystem, and the economy will stagnate (see Figure 1.7).
To support the rise of the Patent market, more companies are specializing as intermediaries to ensure effective and efficient collaborations

between the operations of the various markets. To bridge the chasm

b2559_Ch-01.indd 11

12/23/2016 6:41:52 AM


9”x6”
b2559  Patent Portfolio Deployment: Bridging the R&D, Patent and Product Markets

12

Patent Portfolio Deployment

Figure 1.6   The Patent market has become a crucial connection between R&D market and
Product market because of organizational restructuring

Figure 1.7   Death valleys (chasms) through the three markets

between the Innovation market and the Patent market, qualified patent
agents/attorneys are needed to translate the ideas from the inventors to legal
documents. In addition, the communication between the patent agents/
attorneys and the inventors has to be effective so that the essence of the
inventions can be translated correctly in the patent documents. For example,

b2559_Ch-01.indd 12

12/23/2016 6:41:53 AM

9”x6”



b2559  Patent Portfolio Deployment: Bridging the R&D, Patent and Product Markets

The Rise of the Patent Industry

13

a firm may consider opening up the patent drafting service to a few patent
firms and allow them direct access to their inventors under signed nondis­closure agreements. In this case, the patent agents/attorneys can have a
better understanding of the inventions through direct interactions with the
inventors, instead of acting through the IP managers. Furthermore, the
inventors, through such interactions, can also understand the capabilities
and advantages of the different agents/attorneys, and can accordingly, select
the more suitable ones for their future work. A company may also consider
extending the operations with the patent firm by allowing them to review
the patents of the company and identify those that have a higher potential
for commercialization (Cheng et al., 2012; Li, Lan, & Liu, 2015). The patent firm may also share in the profits of successful commercialization.
In this case, the patent firm will have a vested interest in drafting good
patents that can be commercialized in the future. Other higher levels of
services also start to emerge to assist the R&D entities to identify trends for
R&D investment and development and to design patent portfolios that can
be eventually monetized (Hagiu & Yoffie, 2011).
Technology transfer intermediaries which ensure that patents can be
licensed or sold and be used in the Product market can be used to bridge the
Patent and Product markets. Vertically integrated companies integrate the
inventions directly into the pro­ducts. In this case, a dedicated patent manager may be needed to keep track of potential infringers. With a more
streamlined economy, however, more companies are involved in various

segments in the product production value chain. New inventions from the
technology provider may be licensed to third party manufacturers, who in
turn produce for other end-product providers. In order to facilitate the licensing of inventions to these players, specialized licensing agents are needed to
match the supply and demand between the technology providers and implementers (Wang, 2010). They are the ones who bridge the chasms between
the Patent market and the Product market. These licensing professionals
have a good knowledge of the use of the inventions. In addition, they are
highly skilled in negotiations and communications. They also have
­experience in patent prosecution and litigation. As not many practicing
­entities (operating companies) have these skilled professionals in-house,
licensing agents have a critical role in ensuring good collaboration in
­commercializing the technology. NPEs can also facilitate such activities,

b2559_Ch-01.indd 13

12/23/2016 6:41:53 AM


9”x6”
b2559  Patent Portfolio Deployment: Bridging the R&D, Patent and Product Markets

14

Patent Portfolio Deployment

Figure 1.8   Crossing the death valleys through the three markets

sometimes by initiating patent litigations. However, their primary objective
is to promote patent licensing. This is especially helpful to practicing entities when it is inconvenient for them to pursue potential licensees through
patent litigation. They need a third party to coordinate all these activities
for them. “Strategic Tools” such as patent pools, alliances, and standard

setting organizations are frequently employed in today’s society. Other IP
consultant firms are also flourishing by providing licensing and litigation
support.
In this way, these intermediaries can bridge the valleys of death to
ensure a sustainable ecosystem (see Figure 1.8).
As the demand for such IP intermediaries increases, newer business
models evolve. Patent aggregators emerge to gather more patents and
mass-license them to manufacturing companies to commercialize inventions (Hagiu & Yoffie, 2013). This helps lower the transaction costs and
allows more companies to participate in the patent market.
Other important IP intermediaries in this value chain are brokers for
the sale of patents, patent analytics, patent monetization consultants, and
even patent-based financing intermediaries (see Figure 1.9).
In sum, Figure 1.9 summarizes how intermediaries function and operate across the three markets by leveraging patent portfolios. As earlier
discussed, patent agents bridge the Innovation and Patent markets, while

b2559_Ch-01.indd 14

12/23/2016 6:41:53 AM


9”x6”

b2559  Patent Portfolio Deployment: Bridging the R&D, Patent and Product Markets



The Rise of the Patent Industry

15

Figure 1.9   Intermediaries operate throughout the three markets

the technology transfer office bridges the Patent and Product markets.
Emerging business models such as patent aggregation entities, patent auction houses, and patent brokers facilitate the trade and exchange of patents,
and encourage the formation of patent portfolios. Patent-based financing
intermediaries could leverage on well-constructed patent portfolios to get
funding for future R&D. Patent licensing agents and many other forms of
patent monetization agents focus on using patent portfolios to generate
revenue. Patent analysts who specialize in analyzing patent data could
influence both the Innovation and the Product markets by supplying valuable intelligence, such as making suggestions on R&D and licensing
opportunities. Furthermore, patent alliance and patent pool organizations
bring related patent portfolios from different proprietors together to
exploit the monetary and strategic value of the portfolios.

Bibliography
Cahoy, D. R. 2013. The Changing Face of US Patent Law and Its Impact on
Business Strategy. Edward Elgar Publishing, Cheltenham UK and Northampton,
Massachusetts, USA.

b2559_Ch-01.indd 15

12/23/2016 6:41:53 AM


9”x6”
b2559  Patent Portfolio Deployment: Bridging the R&D, Patent and Product Markets

16

Patent Portfolio Deployment

Cheng, Y. C., Liu, W. T., Liu, S. J., & Hang, C. C. 2012. Quest for the missing linkage: Knowledge-based IP generation strategy for academic institutes. Paper
presented at the First International Conference on Management of Intellectual
Property and Strategy (MIPS2012), IIT Bombay, Mumbai, India.
Chien, C. V. 2010. From arms race to marketplace: The new complex patent
ecosystem and its implications for the patent system. Hastings Law Journal,
62: 297.
Chien, C. V., & Lemley, M. A. 2012. Patent holdup, the ITC, and the public interest.
Cornell Law Review, 98: 1A–1573.
Guellec, D., & de la Potterie, B. v. P. 2000. Applications, grants and the value of
patent. Economics Letters, 69(1): 109–114.
Hagiu, A., & Yoffie, D. B. 2011. Intermediaries for the IP Market. Harvard
Business School, Brighton, MA, USA.
Hagiu, A., & Yoffie, D. B. 2013. The new patent intermediaries: Platforms, defensive aggregators, and super-aggregators. The Journal of Economic
Perspectives, 27(1): 45–65.
Hall, B. H., & Ziedonis, R. H. 2001. The patent paradox revisited: An empirical
study of patenting in the US semiconductor industry, 1979–1995. RAND
Journal of Economics, 32(1): 101–128.
Lanjouw, J. O., & Schankerman, M. 2001. Characteristics of patent litigation:
A window on competition. RAND Journal of Economics, 32(1): 129–151.
Li, C., Lan, T., & Liu, S.-J. 2015. Patent attorney as technology intermediary:
A patent attorney-facilitated model of technology transfer in developing
countries. World Patent Information, 43: 62–73.
North, D. C. 1990. Institutions, Institutional Change and Economic Performance.
Cambridge University Press, Cambridge, UK.
Parchomovsky, G., & Wagner, R. P. 2005. Patent portfolios. University of Pennsylvania
Law Review, 154(1): 1–77.
Somaya, D. 2012. Patent strategy and management an integrative review and
research agenda. Journal of Management, 38(4): 1084–1114.
Wang, A. W. 2010. Rise of the patent intermediaries. Berkeley Technology Law

Journal, 25(1): 159–200.

b2559_Ch-01.indd 16

12/23/2016 6:41:53 AM


9”x6”

b2559  Patent Portfolio Deployment: Bridging the R&D, Patent and Product Markets

Chapter 2

Patent Portfolio Deployment
in Modern Economy

2.1 Patent Rights: Evolution of Their
Industrial Power
Patent rights started off with the simple statutory rights of “making, using,
selling, offering for sale, and importing” granted to each patent. These five
rights actually provide a comprehensive protection to exclude others from
manufacturing (making) to integrating with other components to form the
final products (using). In addition, they provide protection for the afterproduction operations, such as sales (selling and offering for sale) and
logistics in commercializing the technology (importing). These are a set
of negative rights to prevent others from executing any operation based on
these granted rights to the patented invention. Inherent to these five rights
are the rights to sue for either direct or indirect infringement. Direct
infringement occurs when all elements of a patented claim can be linked
to an accused product or process. Indirect infringement, on the other hand,
extends a patent owner’s right to the material components that contribute

to the entire product being claimed of infringing. In addition, the promotion or encouragement of using infringing products may also constitute
unlawful inducement. It is highly likely that all the players in a production
supply chain may be liable for the violation of patent rights, so long as the
infringement is claimed for one segment of the supply chain.
17

b2559_Ch-02.indd 17

12/23/2016 6:42:31 AM